Record management and bookkeeping are crucial to business success. It is highly recommended this task be handled by a professional bookkeeper, but it is beneficial for a small business owner to have some basic knowledge. This document provides small business owners an overview of the responsibilities of a bookkeeper.
We use a small business called “ABC Co.” as an example. The following diagram summarizes the tasks performed by the bookkeeper of ABC Co.
Accounts receivable (customers)
Let’s us start with customers as Peter F. Drucker once said “An enterprise’s purpose begins on the outside with customer.” When customers need products or service, they send in an order to tell ABC Co. what they need. We call it a sales order. ABC Co. ships the products or provides the service according to the order. An invoice will then be issued to the customers asking for payment. After customers receive invoices, they make payments to ABC Co.The bookkeeper in ABC Co. is responsible for recording the sales orders, preparing invoices to customers, recording the payments from customers, and depositing the payments to bank.
Accounts payable (suppliers)
Now let’s look at the other side. ABC Co. needs to buy materials, inventory products, office suppliers, equipment, services, and etc. It may start from placing an order to its suppliers. We call it a purchase order. Suppliers ship products or perform services according to orders received from ABC Co. They will also send their invoices to ABC Co. for the products shipped or service done. We call them bills. It is now ABC Co.’s turn to make payments.The bookkeeper of ABC Co. is responsible for preparing the purchase orders, processing bills, and preparing payments to suppliers.
Payroll (employees)
Another important job is paying employees. If there weren’t taxes, the work would be simple. For example, if an employee works 40 hours a week with a rate of $25 per hour, the weekly salary will be $1,000. We will just cut a cheque for $1,000 and it is end of story. But tax departments require employers withhold payroll taxes, such as Canada Pension Plan (CPP), Employment Insurance (EI) premium, income taxes, and etc. It makes the job much more complicated. So the bookkeeper’s primary responsibility in this area is to calculate the payroll taxes according to regulations and then to issue pay cheques.Tax returns (government)
Now we have deal with customers, suppliers and employees. Who else do we need to deal with? The government! As soon as I say government, I guess taxes pop up in your head. Yes. Generally we need to file returns for GST/HST, PST, Payroll taxes, etc. Some companies hire accountants to do it. But, for small businesses, it actually should be the job of the bookkeeper.Bank reconciliation
the diagram, you can see payments are the major transactions. And the main tasks for a bookkeeper are to process payments. The bookkeeper of ABC Co. has to process payments from customers and prepare payments to suppliers, employees, and the government. So the bank accounts become the center point of the book and need to be reconciled. The purpose of bank reconciliation is to make sure transactions are recorded completely and accurately.There are some other tasks for a bookkeeper, such as preparing necessary reports, assisting accounts, and etc.
